4 Mistakes to Avoid When Building an Investment Property

Everyone loves the thrill and excitement of building a brand-spanking-new home. But when it comes to an investment property build, one should proceed with caution. If you’re not prepared, by the end of the build, your budget can be shot to pieces, making it even harder to claw your way on top. So how can you keep a build from blowing out? Whether you’re a Freddy First-timer or a seasoned veteran, here are four common mistakes to avoid when building an investment property.

1. Mind the ‘F’ word

There’s a magical little word that often appears on property advertisements, right next to that can’t-pass-up ‘amazing’ price. It’s a fairly innocuous four-letter word, but it can cause big problems for unsuspecting buyers. And that little word is ‘from.’ This is known as ‘bait advertising’ and the idea is to bring as many people as possible into their sales offices. These trained sales professionals know all the right things to say and how to appeal to your wants.

They’re trained to upsell you on everything from light fittings, door handles, taps, raised ceilings, larger doors and even more rooms. Once that happens, Boom! Your ‘bargain’ investment property is blown way out over budget before you’ve even laid the foundations.

So a word of caution, to avoid over-capitalising on your investment, leave your emotions at the door. And mind the ‘F’ word!

2. ‘Turnkey’ properties

Ah, ‘turnkey.’ Another buzzword that’s claimed a few industry rookies over the past few years. As the name suggests, a turnkey property build is a package that includes the lot, so a tenant could walk up, put their key into the front door and they’re Home Sweet Home. However, there is some misrepresentation in the term. If the so-called turnkey property is missing anything, it will cost you a lot more to install individually after it’s built. And on top of that is the added cost of having the property vacant in the process. If you buy a turnkey investment property, make sure it needs no further additions, such as the TV antenna for the roof, a letterbox, clothesline, fence, driveway, or landscaping. Just remember that things aren’t always as they seem.

3. The quality of inclusions

Here’s some unsurprising news. The builder may have included everything so that the property is move-in ready, but a builder is a businessman, and if they can save a few bucks on fittings – they will. Implementing poor quality or cheap inclusions is an effective cost-saving strategy a lot of builders use. It’s important to make sure the level of quality is at least mid-range without going over the top. Make sure you hunt around and compare packages. You don’t want to be replacing items a year later.

4. Not looking harder for fixed-price contracts

Most builders will not agree to a completely fixed-price contract. Which is reasonable enough as they may not know what the site costs will be and like to leave it open for unforeseen circumstances. However, this adds to your overall costs. Some shady builders will deliberately set a low initial quote to get your business, but know full well they’ll increase it once you’ve signed the contract and construction is underway. If you can nab one, a completely fixed-price contract is a big win for a ‘tenant-ready’ build with good, reliable inclusions. This allows you to budget accurately for the investment without being caught by surprise with extra costs, meaning you can borrow exactly what you need up-front to get the job finished. Find a fixed-price contract and you’ll have more dollars and fewer headaches.

Key takeaways

Read the fine print and always look for the word ‘from’

Keep your emotions in check

Make sure a ‘turnkey’ investment property has all the inclusions

Check the quality of inclusions and make sure they’re at least mid-range

Compare similar packages

Look for genuine fixed price contracts if possible – rare, but not impossible.

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